This summer, Eddie Shannon worked through Winrock International's Farmer-to-Farmer program, helping Novgorod Bacon develop future business strategies. For more on Winrock, go to www.Winrock.org.

There is much activity in Russia’s food and agriculture sector today, and much more to come. That’s not to say there won’t continue to be obstacles, but there are opportunities for innovative parties inside and outside of the country.

For example, just last month CKE Restaurants and Bright Star, a Russian fast-food franchise, opened two Russian Carl’s Jr. restaurants in St. Petersburg. The plan is to open 48 more in the next eight years. Hardee’s is another CKE property, and there are plans to move both restaurant products deeper into the global market.

In Russia, consumer meat demand is outpacing production and import growth, according to Erik Hansen and Mikhail Maksimenko, with USDA’s Foreign Agriculture Service.

Post-Soviet consumers are no longer satisfied with the same old products. Just as in the United States, Russian consumers are demanding meat with minimal preparation. Two working parents or single-parent families don’t have time to spend hours cooking. Young Russians have little cooking knowledge and less desire to learn. Slowly, Russian consumers are becoming concerned about health and nutrition.

Sausage has historically been a popular product. Through July 2006, sausage production grew 5.6 percent to 1.2 million tons. While sausage’s popularity will likely continue, consumer shifts will influence future meat trends

The point being, companies that can provide consumers with products that meet their changing needs and desires will be the ones to prosper.

Domestic pork production grows

There are many pork producers in Russia, mostly carryovers from the Soviet days. Small farms account for about 50 percent of Russia’s pork production. As of Aug. 1, total pig inventories increased to 15.6 million head, up 5 percent over the previous year, reports FAS.

According to Russia’s Ministry of Agriculture, total meat production from January to August for those small farms was 3.7 million metric tons (live weight for slaughter). That’s 3.7 percent higher than for the same period in 2005. Pork production increased 4 percent. Actually, the pork, lamb, goat and poultry sectors all increased; only beef declined — by 6.5 percent. Large farms increased their meat production by 8 percent to 2.05 million metric tons. Those farms raising pork increased 9.5 percent. Beef again dropped by 7.8 percent, and is expected to decline further next year. Meanwhile, the pig crop is expected to continue to grow.

Feed prices, which have been extremely high due to low production, are showing signs of dropping.

Foreign fingers in the Russian pork pie

The country imports huge amounts of pork, 500,000 tons in 2005 according to official reports. During that same year, Russia produced almost 37 million pigs. Through the first six months of this year, pork imports increased 38.6 percent, according to FAS. So the appetite for pork is strong.

With trade, come uncertainties and challenges. In July, a dispute over U.S. meat exports to the Russian Federation surfaced, as Russia stated it has concerns with U.S. regulations and questioned the safety of America’s beef and pork. A nagging obstacle for pork relates to trichinosis perceptions. On Aug. 11, a delegation from the Russian federal food quality agency, Rosselkhoznadzor, headed to the United States to audit swine production units and processing enterprises that export pork.

Brazil has been Russia’s primary beef and pork supplier. Russia also has placed restrictions on Brazilian meat imports because of foot-and-mouth disease concerns. However those are on a state-by-state basis. On Aug. 10, restrictions were lifted on the state of Mato Grosso, allowing pork and beef produced after July 1 to be imported. The ban remains on seven other Brazilian states.

Russia also may soon resume pork imports from China.

Within Russia’s borders, a Spanish company, Campofrío Alimentación, has announced it will invest up to $20 million in pig production. It plans a production capacity of 55,000 pigs or 6,000 tons of pork annually. The complex is scheduled to begin operation in 2007.

A German firm, Banss has a $50-million hog slaughter and processing operation planned for the Belgorod region. By 2008, that region will produce 200,000 tons of pork annually.

Desire for independence and growth

No question, that Russia wants to and needs to grow its meat sector. Obstacles such as poor road conditions and an underdeveloped infrastructure create challenges. “Some companies are actively expanding their own transportation fleets and are considering plans to develop specialized distribution sectors,” note Hansen and Maksimenko. “However, many agricultural producers do not plan to invest in their own transportation and logistics, so the market may run in to problems storing and supplying meat by 2010 due to growth in meat product sales.”

A regulation on meat shelf life, storage and labeling is up for revision. "Fresh/-chilled" meat has been limited to a 14-day shelf life. The new revision allows refrigerated, vacuum-packaged meat with a 45-day shelf life to carry the fresh/chilled designation. However, the domestic slaughter-to-retail chain is not equipped do this safely. Large retailers will have an edge. Also, the new regulation may change the structure and type of meat imports, say Hansen and Maksimenko. Beef and pork would benefit.

Efforts are underway to revise and further develop the meat infrastructure. Russia’s Ministry of Agriculture selected 1,160 projects to assist with new farms and upgrade existing ones. Eight-year credits equaling $1.5 billion ( U.S.) will be allocated in 2006 for construction and modernization of the livestock industry, reports FAS.

As part of a National Agriculture Development Project, Russian producers raised $3.9 billion ( U.S.) in loans to construct and upgrade meat and dairy complexes, say Hansen and Maksimenko. However, some analysts believe project participants will face many challenges, including competition from imports, outdated processing methods, impractical logistics, prices and the difficulty of working with trade networks. Also, the aging population in agricultural areas will create future challenges as younger generations don’t want to follow this career path.

Without question, the Russian meat, and more specifically the pork, sector is growing and evolving.

Regardless if it involves insiders or outsiders, there are opportunities in the Russian food market for those willing to pursue them.

A Snapshot of a Russian Pork Company

Novgorod the Great is the oldest city in Russia. The food and beverage sector accounts for 20.9 percent of its total industrial output, up from 16.8 percent in 1997. Major segments include meat, dairy, vegetable and other food and beverage products.

During the Soviet Union’s breakup, the current director and two partners acquired Novgorod Bacon. They revised production according to traditional recipes, and strictly adhere to government standards — something many competitors don’t do.

Novgorod Bacon produces more than 2,500 tons of sausage annually, and offers some 120 meat varieties. It employs 2,000 workers, half in meat processing; the rest on the company farm.

The company wants to expand its market geographically, as well as its productivity. It is offering frozen, ready-to-cook meat patties, marinated meats and other quick-and-easy items. The company owns eight groceries and supplies to local and regional groceries and wholesalers.

While Novgorod Bacon’s production standards are high, sales and marketing are non-existent. There’s no differentiation, no set sales goals, no target marketing, little personnel training. But, the company director is eager to improve the business.

Edie Shannon helped the compnay embrace strategic planning, explore financial sales goals, determine target markets and establish incentives rewarding customer service. If the company follows through, it should gain the desired market share and improve its financial sustainability.